Annual Corporate Governance & Executive Compensation Survey

2019 Corporate Governance & Executive Compensation Survey

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Shearman & Sterling LLP 22 | Closing the Gender Pay Gap CLOSING THE GENDER PAY GAP Doreen E. Lilienfeld and Matthew H. Behrens From Wall Street to the soccer pitch, public interest in addressing the gender pay gap is greater than ever. While the press covers the U.S. Women's World Cup team's struggles to earn equal pay for equal (or, rather, superior) work, ESG-focused investors are demanding more granular disclosure of companies' efforts to close the gender pay gap. Companies that fail to address gender pay inequality may not only see reputational damage, but may find themselves at a competitive disadvantage as talent migrates to those companies that prioritize fair pay and opportunities for career advancement. Companies that INSIGHTS THE GENDER PAY GAP AS AN OPPORTUNITY GAP Here are the facts: In 2019, the median pay for women is 21% less than the median pay for men or, put another way, women earn only 79 cents for every dollar earned by a man. 1 When factoring in race, the gap grows even larger. For each dollar earned by a white man, a white woman earns 80 cents while American Indian, Alaska Native, black and Hispanic women earn just 74 cents. By its nature, a "median pay" comparison is derived without regard to job type, seniority, location, experience or other similar factors. When applying an "equal pay" measure that controls for the same position and qualifications, the gap shrinks substantially — such that white women earn 98 cents for every dollar earned by a white man while non-majority women with similar educational and other qualifications earn 97 cents for every dollar earned by a white man. 2 The large median pay gap compared to the smaller "equal pay gap" serves to illustrate that the gender pay gap may be more properly characterized as an "opportunity gap." For example, while 75% and 74% of men and women, respectively, start their careers as individual contributors (i.e., they do not manage others), by late career, 57% of men are managers or higher while only 41% of women reach managerial ranks. As discussed below, shareholder proposals on gender pay are evolving in light of investor recognition that the gender pay gap reflects a failure to promote women to, or hire them for, jobs with more responsibility that are higher paying. 3 1 See Payscale, The State of the Gender Pay Gap 2019. 2 Id. 3 Id. do not keep up face the risk of potential legal action, as well as shareholder and consumer backlash. This article analyzes recent developments in the gender pay gap debate and offers practical advice to companies confronting deficiencies in this area. IN 2019, "EQUAL PAY DAY" WAS APRIL 2 — THIS DAY MARKS THE ADDITIONAL MONTHS A WOMAN MUST WORK TO EARN WHAT A MAN EARNED IN 2018 (MEASURED USING A "MEDIAN PAY" COMPARISON)

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